Love this strategy!

One I often used to read about was 1031 exchanging up and up over the years into more valuable properties and then at the very you trade a large apartment complex (likely holding) into your dream mansion SFR, then rent it out for a year before moving in to then recapture that 2 of out of last 5 primary residence designation. I think it still holds true as a viable option but that was awhile ago.

Yep, I had similar thoughts at one time as well. While I have utilized a 1031 before, I bought this one with Camaro money.

You know how those custom projects go. They always cost more than you thought they would up front.:headspin: So I decided to utilize the primary strategy for 2 years while we build. It's worked out very well for our stage with Hugh and living simpler.

I have a very simple philosophy that has served me well so far. If a house doubles in value, I sell it. I'm glad I didn't utilize a 1031 on a number of them as I would of been forced to move up in value with poor markets on the horizon. It would've cost me far more than the 15% capital gains and I was only 2-5 years into the depreciation cycle. In fact, the 1031 I did utilize ended up costing me when I exited a market a bit late.

At this point my plan is to wait until the next recession and buy when the market is the most pessimistic. I don't mind moving in and out of markets as long term rentals mean bad tenants and major repairs at some point. Now, I only buy if the numbers make sense. I don't make the numbers work. If I get caught, I want the choice to hold long term. That's the real key to real estate investing. Can you wait until the timing is right worst case? If not, don't buy it. Unless you are a big risk taker and I'm not. I don't mind being the tortoise.

Yep, that's what I thought...death accelerates basis...

There are MANY ways to invest in rental real estate....

I, for one, have ZERO interest in managing a rental. I don't want to know about the water heater that quit working on Sunday afternoon.

I invest in LLC's that buy larger commercial apartment complexes - they do all the management.... I collect a check every 6 months for my shares. The last one I invested in ($900K) pays me $60K a year... I get the offsetting depreciation just as I would if I owned it personally.... and we recapture the depreciation upon the sale of the property (again, just like you would on any rental).

I got a statement with the last "dividend" check --- showing the value of my investment is over $1.9MM now. The rental market in the Seattle area has been ON FIRE.... and as such (after an extensive remodel of the property) they've been able to substantially increase the rents.

Just throwing this out there for those - that like me - have no interest in managing a rental. There are many firms in every area of the country that do this kind of income property management. You just have to ask your attorney or accountant.... They'll know someone.

Typically a share goes for somewhere between $50K and 100K per share. Sometimes they'll sell a half share. You do have to be an "accredited investor" to invest in this type of deal -- they're totally illiquid -- and you have zero control of when the property is sold.... so your money may be invested for a very long time (as in YEARS) and there's nothing you can do about it. So like any investment -- it should be a small percentage of your investable dollars. Remember the 5% rule!!

End of year reminder folks!


Don't forget to review your accounts


Before you decide to SELL ---- make sure you check to see if you're close to collecting a dividend? Do you have profits to take that the sale will offset (for taxes).


Do you have outsized gain(s) that you want to offset losses with? If so -- make sure you check - are they long term gains (one year and one day ownership) or short term etc.


This IS NOT a list of all of the thought process --- it's simply a reminder to look at your accounts -- think about TAXES -- and IF you are going to do some balancing -- there are things to think about!


In other words ---- don't just indiscriminately punch the Buy or Sell button without thinking it thru.

It doesn't appear that the Great Recession less than 10 years ago changed the behavior of many citizens. Housing debt is a little lower, but other debts/overall debts are actually higher than 2008. With interest rates still so low, you have to wonder how close we are to the end of the short term debt cycle.

When consumers run out of available income for credit, spending decreases. Remember, a majority of the money exchanged for homes, cars, college, etc. is with DEBT not cash. With interest rates near zero, that card has been played to spur spending since 2010ish. Will we see some inflation before things taper off?

I can tell you that $0 down loans and similar products to stated income are back in the housing market already. I've seen many around me take on new cars, boats, RV's, etc. over the last few years. All financed of course.

As usual, time will be the best teacher.

My search varied some, but up to 78% of Americans live paycheck to paycheck or damn close to it.

I've been hearing people talk about us being in another bubble and that it's only a matter of time before it pops. I'm not surprised people are taking on more debt that they should. We're a very materialistic society. I won't get into that trap. I'm sure someone could show me how I can leverage the cheap lending situation to make more money for myself, but I'm not interested in putting myself at that much risk.

This is what people don't understand about "leverage" (borrowing and having to pay back that borrowing) -- is the RISK they're assuming. The more stuff people own (the banks own - the people are making payments) the more risk they've taken on -- and when a recession hits - or the company downsizes - or is bought / acquired.... That risk multiplies in a HUGE hurry.

That is when the old saying "cash is king" comes into play! I've made the most money in the biggest downturns. You can get houses cheap - apartments cheap - stocks cheap.... LOL

The value of anything is the life you must exchange for it.

I didn't think of debt or obligations this way until recently in my life. My good buddy had a truck that was paid for or close to it. It was serving him just fine. He went out and bought a brand new truck because he's 51 and just wants to LIVE. (He tends to be a paycheck to paycheck guy) My perspective is now he must work to pay for the truck every month. Debt is really the antithesis of freedom.

I've spent the last 5 years of my life going the opposite way. I've worked continually on putting more margin in my finances and obligations. I've done that by reducing my liabilities(Currently have zero debts) and increasing my income.(Over doubled) I've hired better staff that reduces my work load and figured out what's of greatest importance daily. I say NO more than I ever have.

Focus is the art of figuring out what to say NO to.

The most successful say NO to almost everything. -Warren Buffett

Wealth is a pretty simple formula. The distance between your liabilities and income need to grow. The farther you can live below your means, the faster you will obtain wealth. After all, you must have the capital to take advantage.

I agree with Greg. I used to look at a recession or downturn in a very negative light. Now, I would see it as another opportunity to take advantage of a Spring. BUT, you have to be prepared for a rainy period and that happens over time, not days.

The most money is made with the market is MOST PESSIMISTIC. When the news, your friends, and coworkers are talking about how bad it is, that's your key to start looking for opportunities. :lol:

Now, I do still believe in leveraging some real estate with debt. The numbers on an investment property just need to make sense for the long term after counting all the costs.

Bitcoin
 

I have never been a fan of gambling with investment dollars. There's so many reasons for this I could write a book -- but #1 being - this (gambling vs investing) is the number one way to shake a newbie out of the game forever....

Is there money to be made taking on something like a Bitcoin? Oh sure there is! Is there money to be made shorting a stock you're sure is headed south? Heck yeah! But this is investing 102... it's about getting started and learning A strategy that will get you in the game and hopefully keep you in the game long term -- and with some success.

Ask yourself --- at what point you'd have put money in Bitcoin only to wake up to a 30 or 40% down move... and tell me straight up you wouldn't have panicked and blown out of the position with a startling loss... Check out this chart -- this is the THIRD time this year already for this stuff. Yeah - just no thanks for this cowboy.


https://lateral-g.net/forums/attachme...1&d=1510581308

I'm trying to catch up with this thread, but with over 5,000 posts it's going to take a while. In the mean time, do you guys have any suggestions for investment opportunities outside the stock market? With the meteoric run we've had recently, I'm starting to consider other options to hedge my bets a bit.

I've considered buying some rental property, but when I look at the day-to-day time and cost investment I'm not sure it really makes sense. As mentioned a couple posts back, investing in an property management firm would be a great alternative I hadn't considered, but I'll have to do some research there to better understand just what is required and what the risks are.

Any other suggestions for ways to diversify my retirement package?

You'll find a lot of the posts are redundant --- because "new" people generally ask the same or similar questions --- so much of the info is repetitive.....


So here's an interesting thing --- and you'll see it in here repeatedly..... I love it when people cite the market is "high"..... Go to a charting site such as Google Finance.... Enter SPY - or QQQ (these are the symbols for the Dow and the Nasdaq tracking stocks).... and select the longest length of time the chart will allow (Googles is "ALL").... then come tell me when the market was too high.

I'm not trying to be a smart ass here -- my point is that while there are MANY ups and downs in the market ---- the point of this entire thread has been --- get in the market and STAY IN.... because OVER TIME -- the market (chart) is lower on the left and higher on the right.

You'll find this in housing and apartment investing as well.... you'll find it in Bond investing.... you'll find it in EVERY kind of investing. Things go up - things go down - but over time they'll be higher than where they are.

So with that in mind.... what you're really asking for people to do is to tell you where to invest that isn't going down from here. That, my friend, is impossible. You'll see me and others refer to the little man behind the curtain -- he knows when you've bought and he takes whatever you bought and takes it DOWN. LOL it's the way it works. It's a test to see if you're a real believer - or a trader - a weak hand or a strong hand.

I've found that over the last 30 years of my investing life --- when things go to hell -- EVERYTHING sucks. When the market is bad - so is the real estate market... etc. So to-date I've not found a way to be good when things suck. Rich people get richer buying from the weak hands when things suck. They have the ability to have cash on hand and take advantage of those that don't. Sorry to be blunt - but that is the way the world works. Now -- if you think -- well then..... I'll just sit on my cash and wait until the market goes south and then I'll strike. Mark my words -- it will never happen - because if you're afraid to invest now -- you'll be more so when the going gets bad. And in the meantime -- you'll have lost out on the rise in values while you wait.

Here's the way I look at it --- If I buy now - today - at some point I will be bleeding red.... #1 I'm not ever going to be "fully invested" -- I'm always going to have cash reserves.... and if I'm real lucky -- the market will go up from when I buy. Let's say what I bought appreciates 20% -- and then there's a vicious selloff and the market goes down huge - like 10%.... I'd be buying more - and I'd view that as lucky because I get to buy when something went on sale.

So I've just summed up the last 5000 pages for you. LOL

Haha! Thanks for the recap!

I started reading this backwards from the newest posts and saw mention of real-estate. It caught my interest because after researching rental properties a few times over the years I've always dismissed the idea as not fitting my investment style. Investing in a management company hadn't occurred to me before, so it's something new to consider.

After that, I went to the beginning of the thread and now I realize the predominant wisdom is more of a buy and hold stocks strategy. Interestingly, that fits pretty well with my investing philosophy. In the last 10 years or so I've probably sold about that many stocks, maybe double that (not counting rebalancing and the like). I still have positions in most of the stocks I've bought over the years. There are a few I should probably ditch, though.

That said, I like to hear what ideas other people have. There are without doubt diversification avenues I haven't considered.

Check with your accountant and lawyer about whether or not they know people in the Real Estate LLC (Limited Liability Corp) business. That's how I got started in them many many (25+) years ago. They've been staggeringly good investments for me. Caveat here -- they are NOT suitable for retirement accounts such as IRA and 401's etc. Do not invest in them with that money!

The other couple of great investments I use - again - via my accountant (their customers) or my law firm etc is mortgage investments - where I hold the mortgage secured, of course, by the Deed of trust.... These typically pay above market (the stock market - which I look for an average of 5% dividend) rates and after the people pay me monthly for years and years -- they still owe me most all of the principal. LOL

Caveat -- real estate is THE WORST EVER investment for liquidity. If you can't hold thru a 10 year bear market or longer.... don't bother.

By the way ----- you missed one extremely important investing strategy that is 100% important here --- not just investment in stocks -- but DIVIDEND PAYING STOCKS WITH GROWTH. You'll read more about why this is critically important along the way.

From posts in the past, it seems like not too many people in this thread own GE, but at least as a newbie, I found this article very interesting. GE is cutting their dividend in half, and it sounds like they're trying to cut costs elsewhere. On the positive side, this kind of makes me wonder if this is signaling a turnaround in company culture that they need? Therefore, pick this stock up while it's down and hopefully the dividend rises over time as well. Or, on the negative side, is this just evidence that GE is in trouble, and staying away is the best choice? Food for thought.

https://www.washingtonpost.com/news/...=.560b20882041

I've been heavily invested in growth stocks, which has worked well for me, but I'm beginning to want something more conservative. Dividend stocks are another avenue I've been considering.

Wat do you consider a good dividend yield? 4%, 5%? I know it depends on how the stock price is moving, but in general I'm wondering where you set the lower bar.

It's best to not be early...... or in Wall Street parlance --- Don't try to catch a falling knife.


Let it play out -- and wait for them to begin to post a couple quarters of improved earnings and cash flow etc. You're only going to pick up a few pennies if you're lucky and catch it on the lowest day of trading.

Remember that there are LOTS AND LOTS of people holding this stock that are looking for any excuse to SELL it now with the low dividend and poor growth prospects.... Think about a Microsoft for 10 + years of going nowhere.... and then they finally get a new CEO and off she goes.

This is also known as "dead money" --- money that sits for years without a decent return in dividend, since it's a KNOWN % and you could have invested in something else with double or triple the dividend %)...

When you finally find the time to read this thread --- you'll see a common theme discussed.

If you're going to accept a lower dividend - then there has to be growth with it - and you can take a higher dividend % - without as much growth. It's called TOTAL RETURN.... which is what is most important in investing. The total return you get on your money. Many times that's some combination of dividend and growth. I ALWAYS ALWAYS ALWAYS check the total return on a stock for a number of years (backwards) before investing. I'm looking for a 100% total return in something under 10 years and preferably in 5...


I want a blended return in cash flow (dividend) of at least 5%..... the growth is on top of that. Sometimes that growth is slower - or backwards or awesome -- but I count on the DIVIDEND to carry the investments when the market has gone south.

5% is the number that came to mind for me. Though it's likely because it's something I've read somewhere in the past. I doubt I'm clever enough to come up with that myself :) It does make sense for the return to be at least high enough to account for inflation, which is less than 3% currently if my Google search is to be believed.

So all in you're looking for a return in the range of 7% to 14%. I guess the gold standard is to do better than the market, which will depend on the time frame you're looking at. I think historically that's going to be around 12%, or doubling your money about every 7 years. I could certainly live with that!

Greg,

Thanks for all you do in contributing to the site. This thread has been awesome.
Your broad knowledge and experience is awesome. :patriot:

Agreed! This is a fun thread with a lot of high value information. I appreciate all the effort that has gone into it.

I don't know that I ever held myself to any particular standard..... seriously. What I'm trying to do is to create enough cash flow to more than cover living expenses and taxes.... and not dip in to the capital.

Generally there is capital appreciation over time (time is variable) with "most" investments (NOT BONDS)... and that is gravy in my eyes.

For most people - they're not yet taking the dividend to live on - and that's where the growth really gets accelerated. Taking the cash - and the growth, combined - is where the magic can really start. At some point then - you're retired (I've been for 24 years or something like that) and want to live on the cash created - which is where the accumulated pile needs to be sufficient.

If you figure (as I do) to average 5% dividend - and factor a 20% tax rate - then you're net cash is about $40,000 PER MILLION. Scary when you think about it really..... that if you're earning $150K a year now - you'll need 3 million invested to replace that spending.

This is why -- when you come to retirement - you don't want 20 years left on your mortgage....

Thank you..... it's been fun for me as well. The thrill I get when I receive communication from someone that retires comfortably - or suddenly has some real savings/investments and is doing well on them - or someone that paid off their house early.... whatever.... that's a real high for me.

Retirement SHOULD BE the best time of peoples lives.... worry and hassle free... and should be the payback period for everything they've done in the past to get there. Having some money does, in deed, buy happiness.

How do you deal with shrinking dividends as a percentage when stock prices rise? I started out with stocks that pay high dividends but the dividend percentage has shrunken over time. Do you sell them to buy stocks with higher dividends or do you hold them and live with a smaller percent on a higher value portfolio?

Hope this makes sense.

Thanks,
Don

Here's a question I've been chewing on for a while, if I put all of my retirement savings in an IRA, if I decide I can retire before 59-1/2 am I going to have to pay an additional 10% penalty every year until that 59-1/2 mark? If so, that's going to HURT!

EDIT: It looks like there is a way to make early withdrawals, but it carries some risk. There is the 72(t) Substantially Equal Periodic Payments (SEPP) option. It would require some planning to get it right, though.

I think you're doing the math incorrectly!! Or at least I hope you are!


The dividend should only be calculated on YOUR COST basis. To do this --- divide the ANNUAL dividend paid - by your cost per share....

DON'T look at what it's paying currently on the price it's trading at today. What should really be happening is that your dividend PERCENTAGE should increase as they raise the payout - and your cost stays the same (unless you're adding to the shares at which time you need to calculate your new cost basis).

Does this make sense?

I have no idea and would only discuss questions like that with a tax professional.

I'm 64 now and don't withdraw from our IRA... nor do I add to it either - but I do have it entirely invested in high risk growth stuff. We don't need it - so why not try to have it grow until they force me to take it (70). My wife is only 60 and is also retired.... I want her to hurry up and get her Social Security. LOL ---- Seriously not really but I rib her all the time about it.

Now that is something I hadn't considered. Assuming even a moderate increase in the share price and a static dividend, the dividend calculated at your cost basis could be quite high! I suppose the company could reduce their dividend to compensate and keep the payout flat.

With that in mind, I guess the screening tactic is to look for a stock with an increasing price and either a static or increasing dividend.

That’s entirely possible. I understand what you are saying. But here’s the way I was looking at it. Suppose I’m retired and my portfolio that cost me $1000000 is now worth $2000000 thanks to your awesome advice. The 5% dividends on the $1000000 cost basis is now yielding 2.5% on the current value of the portfolio. But because I am retired I would really like to see 5% on the current $2000000 value. :) So would it make sense to move into stocks that are paying 5% on their current value today, assuming I could find any that I understand and trust?

Hope this makes sense.

Thanks,
Don

I see what you did there.... even if inadvertently, I like it. I like deeds. :D

I'm living this quandary for real...we have always been very aggressive with our IRA and 401k contributions (to take tax and matching advantages) and currently sit with about half of our Net Worth in Pre-tax accounts. I'm 50 and the wife is 55 years old.

We are rearranging the post tax assets to try to make them cover living expenses until we can access the pre-tax money without penalty.

But hey, at least we have the pre-tax money there...just in case we do need it.

AH HA!! Yes that's a better question --- but hopefully you've also made certain that you know the real dividend percentage based on your cost.... Many (not always) dividend paying stock appreciate in lockstep with the dividend payout.... but I also totally get what you're asking about. I'm having this very issue with the last apartment complex I invested in!! It was a million dollar investment paying 7%..... so now the apartment is valued at almost double - so my capital appreciated but my payout is static.... thus - if I use your method it's paying me about half what I could try to make if we sold and took the capital gain.

Okay -- gets complicated and try not to trip yourself up!


Example --- you bought Altria (MO) 6 years ago and it's now doubled in value. Let's say you sell half - and create a LONG TERM capital gain. That gain is going to be taxed at 20%.... so you'll have "less than double" than you think you were going to have (can't forget about the tax man).... now let's use 10 grand as an example -- so now you really have 8 grand to re-invest.... and you want to earn that 5% on those "new money" investments.

Let's not forget to calc the current dividend on the actual cost basis.... you might find yourself making 8 or 9% on that holding -- and therefore you're really not going backwards - or earning half what you thought! Don't trip yourself up here! Do the math! Now -- if your investment has doubled in value and you're getting 9% on the actual cost - you're really getting about 4.5% on the current value.

Generally companies that are good investments INCREASE the dividend as they go along.... Just look at some of your current dividend payers and look at the 5 year chart and see if they haven't had nice increased payouts along the way. Those SHOULD continue....

Warren Buffet gets more in annual dividend today than his original investment in COKE (KO)..... think about that -- he gets back the entire investment every single year. Not a bad return....

Should you decide to sell that WINNER --- you're going to find yourself in the below dilemma....


YES YOU SHOULD BE DOING THIS generally as a matter of course..... I always TRIM investments and scoop the cash when they are in that 75 / 80 / 90 or more % growth in capital! That does two things -- it helps you further diversify - and it locks in a gain rather than riding it down at some point. Now - you may ride the new investment down or you may pick another winner and they BOTH double again and if the market goes down - they'll both go down -- but we're trying to be smart about it and get that money working and paying you. This is where investing gets hard!

The other day I sold a large chunk of NetFlex (NFLX) because I was up 107%.... it doesn't pay a dividend - it was a pure speculative growth play.... TAKE SOME GAIN!!! Nobody ever went broke taking gains!! If it still continues to steam ahead -- what's left will ride that train.... will I be sorry I didn't leave it all to ride? That's an individual choice. I like to take outsized gains and live to play another day. I scooped 80 grand.... I'll invest that in something and hope I picked correctly and it will still grow or better yet - I'll get 5% on the 60 grand I'll net. I look at it as FREE MONEY. The stock did exactly what I'd hoped it would do (grow like crazy) - it did - and therefore I should be happy.

I'm writing a book here...... but what I'm really saying is -- "it depends" -- depends on the situation.... if you're living off the dividends now -- and you have great capital gains -- and you've done the math - then SPEAK TO YOUR TAX MAN FIRST -- and make sure you're not doing something stupid tax wise..... then by all means take that gain and reinvest it in another cash cow.

Now --- I've been putting money in AMAZON (AMZN) -- it pays zero dividend... but the growth in capital has been stellar! Way more and way faster than a dividend payer. I have a few of those... this is, again, an individual situation. I earn way more than I spend - so I can "afford" to take a few fliers like that (Netflex - Amazon - Alibaba (just sold all of it) - Google etc)..... If a guy is young - so are these companies - to me they are the IBM and COKES and CHEVRONS of yesteryear..... is the market hot for them -- yes - will they sell off big time at some point? I'd assume so... there is RISK... but I'm not using them to live off of - now - or in the future.... I'm just playing and trying to make my money grow....

Thanks for the excellent detailed response Greg. The stocks are in my IRA so no tax implications when I sell. Most of the stocks I purchased when I started following this thread have more than doubled in value. I’m currently not making any withdrawals and hope not to for another 5 years when I’m 65.

Thanks again, this thread is pure win. It has literally been life changing for my wife and I.

Don

Ah --- yeah --- I forgot to discuss/mention IRA's and ROTH IRA's -- DEFFERED TAXES on the IRA/401K's and ZERO taxes for those lucky enough to qualify for the ROTH IRA....


Huge gains my friend! And good for you!! Damn I love when I see someone having a little success! I just wish we'd have had this discussion going when I first joined Lat G..... OMG! There'd be some pretty good gains to have seen there! Lot of guys would be retiring "early" and building cars with all the spare cash!! LOL


It really does get a little tricky when it comes to gains and earnings power etc.... because if you hold long enough - and the gains keep coming.... and the dividends keep increasing..... pretty soon (years) -- you're looking pretty dang smart with a simple buy and hold strategy..... BUT being somewhat "active" as in MANAGING your money.... you can be even a bigger winner.... but so much of it depends on how good of a manager you are and what you've learned along the way. I've seen it go both ways.

Example --- a long term best friend would ONLY invest in bonds.... dumb bunny was in bonds even though that cash was tied up in tax free munis while the stock market was roaring.... I finally got him to take 100,000 and put it in Microsoft and Intel and Cisco and Dell etc.... back when the stuff was doubling every 6 months.... in less than a year -- he had (with my active involvement) over 300,000 in the market. Sadly - he could never pull the trigger on the SELL SIDE!! But he had learned he could make way better return in the stock market than he could in bonds.... so that was a major milestone for me. Now --- what he also did ---- WRONGLY --- was when he found something he wanted to buy - he'd buy it in his trading (taxable) account -- and he'd buy it in his IRA!! His problem was - he could stretch or reach out and trust himself to be a decent stock picker (the reason he was in bonds - because that's pretty much a no failure pick). So when he put 100K in Ginny Mae (can't remember the symbol now) and they went to ZERO during the housing bust - he lost all of it (the 100K in that investment). Now ---- it didn't hurt him - because he was already a millionaire and his house and everything else he owned was paid for years ago..... but those are tough lessons. He'd forgotten the 5% rule!! And he'd forgotten the DIVERSIFY rule! He chased YIELD and got greedy when it was going well.... but he forgot all about RISK. Capital preservation is every bit as important as all the rest of it.

I do appreciate his thanks every once in awhile - and he's told me many times that it was my pushing him that made a huge difference in his retirement. These days he has a brand new pickup and hauls a large 5th wheel around and spends his winters in warmer climates.... with not a worry in the world. That is the way to retire!

"Active" management does not mean trading.... what it means is vigilance - and not being afraid to take a loss when you know the pick sucks.... it means taking profits when they're "outsized".... it means asking the good questions just exactly like what was asked here.... it means trying to control risk but not being afraid or frozen like a deer in the headlights. It's recognizing that if you have a 40% gain and the stock market goes south 15% -- that YOU still have a sweet gain and those dividends are going to keep paying! Active is just a term for DON'T FORGET all the rules.... 5% per any investment (okay they grow and creep up to 7% - but don't let them be 15 or 20% - that means you forgot to take some of the gain!!).

WOW --- another book written! LOL

You take a very complicated topic and boil it down, so it's not so intimidating. Great advice and thank you Greg!

Tim

Let's use ALTRIA (MO) as a perfect example for what we've been discussing.... i.e., when do you trim gains and reinvest in something else so your dividend PERCENTAGE stays up with your "needs"....



On December 21st, 2012 -- MO traded at 33.16 per share - it paid .44 cents per quarter a share then. So it paid 5.3% dividend


.44 X 4 = $1.76 ANNUALLY ---- divide the 1.76 by the price per share (33.16) and you'll see .053075995 Move the decimal point and you have 5.3%

Today MO trades at $65.26 a share -- BUT -- it's now paying .66 cents per quarter.


.66 X 4 = 2.64 ANNUALLY --- but your cost stayed at 33.16 per share! So what's it paying YOU? 7.96% on your cost basis not today's quoted rate of 4.05% which is based on today's price per share.


Now -- let's say this has been a pretty good investment -- you have almost a double in 5 years (2012 to 2017) and you're getting almost 8% dividend on YOUR cost basis. Not a bad "ho hummer huh?" LOL

But you now have twice the money you invested to begin with.... so if you sold HALF - you'd still be making the 8% on those shares remaining --- and you could reinvest in something else and, say, you found something that's paying 5%. You're net cash income would go up and that is what DHUTTON was asking about.


Hope that makes sense to everyone.

Man i Love this Todd. SOOOO true, although, i must admit, i do fall from it from time to time. But def ain't living paycheck to paycheck.

I've got two great things i've learned here over the last few years: How divi's really work (absolutely never even heard of that before) AND in a down turn things "are on sale", I can seriously thank Greg for that, maybe even both.

Working on paying off the house (which is worth 1.1 at the moment, but i think its a 400k house at best lol). But hey, i have three places to leave a sh_t (you don't take one, you leave one) and running water. Perspective.

cheers, mike

Is what you meant by "cowboy", riding the bull? up and down and thrown off...

That's my sole goal..... just making it all make sense. Thanks!